Microsoft today said it would provide the Windows server source
code under a reference license, a move the company deemed the
"ultimate answer" to meet the European Commission's demand for
documentation that would help rivals license communications
protocols in the Windows server operating system.

This means that those companies licensing Windows server software
under the EC's proposed licensing program would be able to obtain
the source code to the Windows server operating system at no
additional charge. The idea is to let programmers get more insight
into how to build non-Microsoft software to work with Windows.

"If someone pays for a license, they will get access to the
source code," Brad Smith, senior vice president, general counsel and
corporate secretary for Microsoft, said on a conference call from
Brussels today.

A spokesperson for the EC said the commission is reviewing
Microsoft's pledge and is putting together a response for later
today.

Smith said the "new step" should put to rest anybody's concern
about the technical documentation Microsoft has provided, noting
that the EC's decision only called for Microsoft to provide
technical specifications about how Windows protocols work -- not the
root code that gives programmers insight into how to build Windows.

"We're not obligated to license this source code," Smith said.
"But one thing is perfectly clear. If you're not able to understand
these protocols, the source code is the ultimate documentation. It
is the DNA of the Windows server operating system."

Smith clarified that a reference license does not allow a
developer to copy source code and use it in his program, but can
"refer to it, study it and learn from it."

The move follows the EC's December 2005 formal objection to
Microsoft's steps to disclose interface documentation that would
allow non-Microsoft servers to work seamlessly with Windows PCs and
servers.

The EC's objection came hand in hand with the threat to bill
Microsoft as much as $2.37 million a day for failing to comply with
its requests.

The EC is giving Microsoft until February 15 to formally answer
its complaint.

Microsoft's latest move has roots to March 2004, when the EC
levied a record $610.4 million fine against Microsoft for abusing
its position in the market.

The EC ordered the Redmond, Wash., company to share code with
rivals and offer an unbundled version of Windows without the Media
Player software.

Since that time, Microsoft and the EC have been embroiled in a
pre-court stalemate, with Microsoft believing its has supplied what
the commission asked for and the commission telling Microsoft its
offerings are insufficient.

Smith said 2006 was important because Microsoft will get to stand
in front of the Court of First Instance -- the second highest in the
EC -- to present its case.

Microsoft is currently scheduled to stand in front of the
European Court of First Instance between April 24 and 28.

"It's the year when the heart of the matter, the substance of the
case can be presented itself," Smith said. "If anything, I think
that we're more confident in the substance of the case than we were
in 2004."

"We thought we were in complete compliance. In fact we continue
to believe today that we were, and are, in complete compliance."